Standard Chartered and HSBC tend to be facing losings of vast amounts in financial loans to 1 associated with globes largest rice traders, in the newest of a sequence of high-profile blow-ups and scandals to hit the commodity trading business.
Phoenix products, a Dubai-based organization that specialises in farming products, is looking to restructure its financial obligation after racking up $450m of losings on currency hedges that moved haywire during violent marketplace swings in February and March.
Phoenix, which will be owned by Indian businessman Gaurav Dhawan and claims to employ 2,500 men and women, filed for insolvency at its Brit Virgin Island keeping organization at the conclusion of final thirty days, according to filings seen by the Financial circumstances.
While this entity does not have any financial obligation of the very own, it offers offered above $740m of guarantees towards debts of Phoenix teams main trading outposts in Dubai and Singapore, relating to a liquidators report issued the other day.
The report said Phoenix had $1.6bn of readily available financial facilities across its primary subsidiaries but does not detail exactly how much the group had attracted upon these credit lines at the time. Mr Dhawan is negotiating with lenders into the groups main Dubai entity additionally the report stated the 45-year-old businessman is within the means of acquiring monetary help as an element of a rescue program.
but a different business presentation seen because of the FT showed Phoenix had drawn $105m from a line of credit provided by traditional Chartered at the conclusion of September and $41m from another facility given by HSBC.
Standard Chartered and HSBC declined to comment.
Phoenix Commodities, Mr Dhawan and the companys chief monetary officer Nitin Navandher failed to respond to needs for comment.
Phoenix traded 12m tonnes of products and products last year and statements to-be one of the biggest rice distribution organizations in the field.
The problems at Phoenix will be the newest in some scandals and failures to hit the commodities trading industry. Included in these are the implosion of Singapore energy trader Hin Leong, the collapse of Agritrade Global and Hontop Energy.
recently HSBC took actions to get rid of the management of ZenRock Commodities Trading, since it tries to hammer on a debt restructuring arrangement. HSBC normally the greatest loan provider to Hin Leong with an exposure of $600m.
The liquidators report states that Phoenixs hedging losings had been disastrously compounded by a Dubai-based derivatives trader surpassing their authority by presumably putting a few additional wagers on foreign exchange in an attempt to recover earlier losings. The hedges had been about the action of the US dollar from the rupee, euro, rand and rouble.
It in addition said tries to secure records and papers have been difficult by the coronavirus lockdowns. Simply because the companys accounting documents are held in the workplaces of a subsidiary called Phoenix Global Trade possibilities, which is positioned in Hyderabad, India.
The liquidators report in addition increases the chance for the BVI holding organization looking for problems from losings sustained because of the companys Dubai trading outpost for the good thing about the companys creditors.
The string of high-profile blow-ups and scandals, including the present crisis at Phoenix Group, tend to be forcing trade financebanks to rethink their particular experience of the product trading industry, a high-volume, low-margin business. This raises the outlook of a liquidity crunch causing a wave of defaults and bankruptcies over the industry.
To shift huge cargoes of recycleables internationally, dealers require use of huge lines of credit and also have to manage volatile price and money movements.
Additional reporting by Stephen Morris and Simeon Kerr